What if the IRS pays an exchange plan late?

The U.S. Department of Health and Human Services (HHS) has come out with a big collection of final regulations and a related "interim final rule" to implement many different sections of the Patient Protection and Affordable Care Act of 2010 (PPACA).

The final rule, HHS Notice of Benefit and Payment Parameters for 2014 (CMS-9964-F), gives rules dealing with topics such as the nuts and bolts of how new health insurance risk management programs will work, how insurers will go about paying for the programs, and how the new "advanced premium tax credit" (APTC) program will work.

The interim final rule, a collection of amendments to the benefit and payment parameters draft regulations released earlier (CMS-9964-IFC), deals with risk-management program details and procedures for calculating cost-sharing reductions for moderate-income enrollees who are eligible for help with holding down deductible and coinsurance payments.

HHS is preparing to publish the final rule and the interim final rule in the Federal Register March 11. HHS will take comments on the interim final rule up to 60 days after the official publication date.

PPACA requires HHS and states to set up exchanges, or Web-based health insurance supermarkets, for individuals and small groups by Oct. 1. States will run or help run some exchange programs, and HHS will run the others.

PPACA also is supposed to create the APTC program. The Internal Revenue would use the APTC program to give people with incomes from 100 percent to 400 percent of the federal poverty level help with paying for health coverage bought through an exchange.

If, for example, Jane Doe, a taxpayer, expected to report 2014 income equal to 300 percent of the federal poverty level in March 2015, the IRS would use Jane Doe's income projection to make APTC tax credits available to Jane Doe in 2014, to help her pay for health coverage in 2014.

HHS officials reported in the preamble to the final rule that, in one section of the regulations, the department will keep health insurers from canceling coverage if an APTC payment comes in late, as long as the issuer has been notified by the exchange that the issuer will be receiving an APTC payment.

HHS is expecting insurers to get the APTC payments in the middle of the month, officials said.

Several commenters wrote to support that provision, officials said.

"One commenter stated that HHS should implement a process to ensure that individuals prematurely terminated in violation of such a provision have coverage reinstated quickly," officials said.

Elsewhere in the preamble, HHS officials talked about some of the rules the department has developed in an effort to create a "level playing field" for exchange plans and non-exchange plans.

Earlier, HHS had suggested that, in states in which HHS provides "federally facilitated exchanges" for individuals and federal exchanges for the small businesses that use the Small Business Health Options Program (SHOP) exchanges, any insurer that sells through a federal exchange will have to offer similar broker compensation for exchange plans and similar non-exchange plans.

Several commenters asked HHS to define "similar" more clearly, one asked HHS to let the insurers define "similar," and one opposed the proposal, HHS officials wrote in a preamble to the final rule.

HHS has decided to finalize the broker compensation provisions as proposed, officials said.

"We do not at this time propose a specific definition of 'similar,'" officials said. "We expect to issue further guidance at a later date."

In sections relating to fees, officials said HHS expects to charge a user fee of 96 cents per enrollee per year to run risk-management programs in states that are not handling the job themselves and an administration fee of 11 cents per enrollee per year. HHS also expects to charge $63 per enrollee per year to fund the risk-management programs.

Some states have argued that setting a flat rate will lead some states to subsidize others, but HHS has decided to start out using a flat rate, officials said.